This Paper provides an analytical characterization of Markov perfect equilibria in a model with repeated majority voting, where agents vote over income redistribution. The key feature of the theory is that the future constituency of redistributive policies depends positively on the current level of redistribution, since this affects both private investments and the future distribution of voters. Agents vote rationally, and fully anticipate the effects of their political choice on both private incentives and future voting outcomes. The equilibrium features multiple steady-states, one with and one without a welfare state. The theory can explain why welfare state institutions, originally introduced in response to specific shocks (e.g., the Great Depression), have been so persistent.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
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Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002.
"The Survival of the Welfare State,"
Seminar Papers
704, Stockholm University, Institute for International Economic Studies.
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John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001.
"The Survival of the Welfare State,"
Economics Working Papers
603, Department of Economics and Business, Universitat Pompeu Fabra.
[Downloadable!]
Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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Stephen Coate & Stephen Morris, 1999.
"Policy Persistence,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1327-1336, December.
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Other versions:
Stephen Coate & Stephen Morris, .
""Policy Persistence '',"
CARESS Working Papres
95-19, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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Stephen Coate & Stephen Morris, .
"Policy Persistence,"
CARESS Working Papres
97-2, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
[Downloadable!]
Boadway, Robin W & Wildasin, David E, 1989.
"A Median Voter Model of Social Security,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 307-28, May.
[Downloadable!] (restricted)
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 1998.
"Equilibrium Unemployment Insurance,"
Economics Working Papers
605, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
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Other versions:
Hassler, J. & Mora, J.V.R. & Storesletten, K. & Zilibotti, F., 1999.
"Equilibrium Unemployment Insurance,"
Papers
665, Stockholm - International Economic Studies.
Hassler, John & Mora, José & Storesletten, Kjetil & Zilibotti, Fabrizio, 1999.
"Equilibrium Unemployment Insurance,"
Seminar Papers
665, Stockholm University, Institute for International Economic Studies.
[Downloadable!]
Benabou, R., 1996.
"Inequality and Growth,"
Working Papers
96-22, C.V. Starr Center for Applied Economics, New York University.
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Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
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